US enshittification vs Chinese involution

In an X post, Marko Jukic, senior analyst at Bismarck Analysis, lamented:

“Enshittification” is sort of a “safe horny” term for what is really just outright impoverishment and declining living standards due to economic insolvency from deindustrialization, demographic decline, hyperinflation, etc.

When you work harder to earn more money that buys less goods and services of lower quality – you are becoming poorer. That’s the word for it.

Enshittification was a term coined by journalist Cory Doctorow to describe the intentional, step-by-step degradation of a digital platform or service as it trades user experience for shareholder profits.

Facebook, which delighted Generation X in our 20s, has, in our 50s, become cringey with clickbait videos, dodgy supplement ads and insufferable political posturing. Advertising on YouTube has become so disruptive that the free version is just barely usable. The strategy appears to be to frustrate users into paying for Premium. Monopoly has its perks.

Jukic is using an expanded definition of enshittification to include all goods and services offered to America’s benighted consumers. At the risk of putting words in his mouth, Jukic’s definition probably includes lousy US$20 salad bowls, financially ruinous medical emergencies and $56,480 Honda Pilots.

Jukic is not the only person who has noticed. On recent visits to the US, yours truly was shocked at the catastrophic collapse of America’s Chinese buffets. Never a luxury dining option, but $18 for tasteless reheated shrimp, limp broccoli and rock-hard egg rolls is unacceptable even to yours truly, the lowestbrowed of diners.

The magic Chinese buffets of yesteryear, with their weekend seafood spreads and Mongolian barbecue stations, have been forced out of the market by food and labor inflation. 

David Goldman, a former columnist at Asia Times and now senior advisor at the U.S. State Department, has noticed as well, tweeting in January 2025:

Is China cooking its GDP numbers? I don’t know. But the US surely is. China’s electricity consumption is now 8MWh/capita, vs. 3MWh/capita in 2010. That’s proportional to the increase in China’s reported real GDP. The US is at 13MWH/capita, unchanged from 2010. We have a lot more GDP in the US, but less industrial production than in 2008. “Real” personal consumption expenditures for health care are at $2.8 trillion 2017 dollars, almost double the 2010 level. That’s 18% of our GDP! But are we really consuming twice as much in health care services?

If enshittification is a thing, what then is its opposite? Han Feizi will hazard controversy and declare that the opposite of enshittification is Chinese involution (内卷). I call it Chinese involution because the term does not apply to any other economy.

Chinese involution is the greatest economic force the world is currently experiencing but utterly failing to comprehend. It is, in fact, the greatest source of value creation the global economy has seen in decades.

Attention in the US has been captured by AI, which may deliver spectacular growth at some point in the future but, right now, has only pumped up inflation, raised interest rates and reduced living standards. Europe and Japan, sadly, remain mired in their geriatric, vassal-state lack of agency.

The Chinese, however, invoke involution as negatively as Doctorow and Jukic invoke enshittification. Involution is an academic term coined by American anthropologist Clifford Geertz in 1963 to describe plots of rice farms in Indonesia where intense labor did increase production, but not enough to justify the additional man hours put in.

The Chinese, caveat emptor, are also world champion whingers. Given the chance, they will talk your ear off about how difficult business is, how nobody is making money, how demanding their children’s teachers are and how everything now is excessively competitive and juan (卷, involuted).

Westerners often make the mistake of taking this at face value, not understanding that whinging is the national pastime. Complaining about business, excessive competition and involution is just the folksy modesty of everyday Chinese conversation. For the superstitious, to speak positively of one’s circumstances is to tempt the jealous ire of the heavens. 

“Involution” is sort of a “safe humblebrag” term for what is really outright and spectacular improvements in quality, features, choice, service and rapidly rising living standards that China has been experiencing for decades, but especially after the Covid pandemic.

For decades, the West has fundamentally misunderstood China’s economy and it is fundamentally misunderstanding it again. The Chinese economy is not stagnating, consumption is not low and China is not flooding the world with exports because it has to – China is flooding the world with exports because its products are thoroughly outclassing the competition.

China has, in fact, hit a patch of turbocharged productivity growth planned decades ago with investments in higher education, infrastructure, the Made in China 2025 program and the recent rapid diffusion of AI throughout the economy.

When an economy hits a patch of turbocharged productivity growth, one expects to encounter deflation, low interest rates and unemployment. The market will be flooded with whizzbang products sold at absurdly low prices.

This is exactly the promise and peril that the AI revolution has yet to deliver to Americans. Post COVID China is on the foothills of the era of abundance promised by technology but obstructed by supply constraints in Western economies.

The idea that China is not growing consumption is preposterous. Since Covid, China’s per capita household consumption has grown multiple times faster than major economies and the world overall. This growth is surely a massive undercount given the revolution in quality, features, choice and service that has swept China’s consumer markets.

China’s National Bureau of Statistics, unlike the Bureau of Labor Statistics (BLS) and Bureau of Economic Analysis (BEA) in the US, does not do systematic hedonic regressions to adjust GDP upwards. China uses a matched-model method which inherently undercounts hedonic improvements.

If a new EV sells at the same price but with better range, power and software, the NBS mostly treats it as a same-priced good. Contrary to popular Western contention, China has always erred on the side of conservatism, underreporting growth and GDP (see here, here, here).

In a previous piece (see here), I calculated that Chinese EVs, post-Covid, have been hedonically improving at ~20% per annum rates. An EV sold in 2026 would command more than twice the price in 2022 (and more than twice the price overseas). This phenomenon exists across China’s consumer products space from home appliances to pots and pans.

Industrial goods exhibit the same phenomenon: Chinese construction equipment makers XCMG, SANY, Zoomlion, etc., have more than doubled their global market share in a decade. It also exists in services as China adopts Japan’s spirit of omotenashi (anticipatory, wholehearted hospitality), if not to such extremes.

China is also rapidly cleaning up its environment after decades of neglect from breakneck growth. Complaints about air pollution have basically ceased (don’t worry, on net, Chinese complaints have remained largely constant).

After a total commercial fishing ban, industrial relocation, improved waste treatment and a ban on new developments along the Yangtze River, fish biomass doubled from 2020 to 2025.

Similar results have been achieved in many of China’s waterways. Since Covid, the number of urban parks has increased 50%, especially noticeable to senior citizens who disproportionately congregate in public greenery.

China’s productivity is driven by rapidly upgrading human capital, automation and artificial intelligence. The country graduates approximately 1.8 million engineers and computer scientists every year (~7x as many as the US).

In 2025, China installed 354,000 industrial robots (~9x as many as the US), accounting for 59% of global installations for the year. China’s installed base of industrial robots is approximately 2.2 million, approximately 45% of the world’s total.

China’s EV companies have a development cycle of 18 to 24 months compared to 40 to 60 months for German, US and Japanese competitors. Chinese engineers readily adopt new technologies like AI-automated factories and digital twins to replace physical prototyping. Given the millions of engineers joining China’s workforce every year, there are just more minds to throw at productivity-enhancing solutions.

These minds have, perhaps, found too many productivity-enhancing solutions. China has lost approximately 10 million manufacturing jobs since 2020, even as output increased 36% (not counting hedonic improvements).

12.7 million Chinese students graduated from college this past June. Many entered college with dreams of corner offices only to discover that only tea shops and Meituan delivery were hiring at graduation. Youth unemployment now sits at 18.9%, a figure of continual lament in the Western press.

Youth unemployment in China is highly misunderstood. China is the canary in the coal mine. It is exhibiting the unemployment every nation will experience if artificial intelligence turbocharges productivity growth, putting an economy either on an abundance or collapse trajectory depending on how things are managed.

Youth unemployment in China is definitely high. Youth in China also have more opportunity than has existed at any time in China’s history. Both statements are objectively true. To be young and unemployed in China can be sublime. Unburdened by student loans, free to live in the family home, youth in China can chill out for years.  

Most do not. Many young people are semi-employed, working gig jobs in stints while they “find themselves.” Young graduates are notorious for job-hopping, never making it past the new-hire probation period. The streets of Chinese cities are crawling with artsy young people with questionable tattoos and life plans.

All of this is rational. The whippersnappers are playing the field, not ready to settle down. The dream job at Xiaomi’s Beijing engineering center did not pan out, and one would rather die than interview for the process engineering job at Donghua Jinlong glycine plant in Shijiazhuang. Besides, there’s the video game idea that one has always wanted to pursue – if only one didn’t waste so much time gaming.

Eventually, these perfectly rational youth, after years of gig work/unemployed loserdom, either become video game moguls like Feng Ji of BlackMyth Wukong fame, celebrated animators like Yang Yu director of Nezha 2 or process engineers at Donghua Jinlong glycine plant in Shijiazhuang. Youth lasts only so long, and China’s unemployment rate for the 25 to 30 year-old-age bracket is 7.5%.

“[Every] time Beijing recognizes its economy has a demand problem, its solution is a supply plan”, a Western commentator on China’s economy lamented recently. The commentator may or may not know that this has been going on for decades and that he is only half correct.

In M. Night Shyamalan’s 1999 horror/mystery film The Sixth Sense, a troubled young boy is haunted by his supernatural ability to see dead people. These specters torment the boy with their frightening apparitions and creepy utterances.

“They only see what they want to see. They don’t know they’re dead,” the boy explains to a guardian angel of sorts who helps him realize that these ghosts only wanted his help.  

Let’s try to help dead people. Beijing has never recognized that it has a demand problem without explicitly matching it to a supply plan. Western analysts who harp on Beijing’s demand problem are like the dead people in the Sixth Sense. They only see what they want to see. They don’t know they’re dead.  

Beijing may know that China has a demand problem. But Beijing is also surely aware that their five-year plans (which have largely been supply-focused) have increased household consumption more than any other economy in the past five decades.

All 218 of them (World Bank classification). And not by a little – by a country mile! From economic takeoff, China has grown household consumption twice as fast as the second-place Asian Tigers in their miracle years.

Since the financial crisis, China has grown household consumption 226%, multiple times more than the US, EU, Japan and the global average.

If, indeed, over all these years, Beijing diagnosed a demand problem and decided the solution lay in supply, the spectacular increase in China’s household consumption should be vindication.

At a recent event, economist Yu Yonding stated, “In fact, throughout the history of economic thought – from Marxist political economy to orthodox Western neoclassical economics – there is no theory that supports the idea of a consumption-driven model of economic growth.”

Should it be all that surprising? Chinese policymakers are growing the economy according to Say’s Law, a fundamental precept of classical economics. In his 1803 A Treatise on Political Economy, Jean-Baptiste Say wrote, “A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value” or, as is often simplified, supply creates its own demand.

There is a certain morality to Say’s Law that appeals to China’s qinlao values (see here). Produce things, be thrifty and good things will come to you. If many Chinese are very good at this, very good things will come to you and you get to humblebrag about involution.

The West, in its inability and refusal to compete with China, seems to have adopted the opposite of Say’s Law – cargo cult economics. Don’t produce anything, don’t educate the population, talk loudly about re-industrialization (but only talk) and wonder why things are getting enshittified.